Monday, 3 December 2007

Berlin Real Estate Purchase Cost

One of the most asked questions by investors new to Berlin is regarding the typical cost involved in making a real estate investment.

The cost depends on the price of the property and the cost tables for the notary public and the land register. They are digressive, in other words, the higher the price, the lower the percentage of the cost.

For a property with a purchase price of € 1 million the cost would be roughly:

Notary Public

for the contract

6,965


For an escrow account if required (based on $ 500k)

3,020

Land Register


4,280

Property Sales Tax

4.5% in Berlin



(3.5% rest of Germany)

45,000

Agent Commission

Between 4 and 6 % plus VAT,



(assume 4%)

47,600


Total

106,865

For a property with a purchase price of € 2 million the cost would be roughly:

Notary Public

for the contract

13,660


For an escrow account if required (based on € 1 mill.)

5,995

Land Register


8,410

Property Sales Tax

4.5% in Berlin



(3.5% rest of Germany)

90,000

Agent Commission

Between 4 and 6 % plus VAT,



(assume 4%)

95,200


Total

213,265

For the quoted size of investment as a rule of thumb it is safe to use 10 % purchase cost for an initial calculation, with higher values reducing the percentage slightly.

These figures also identify the items where savings can be achieved:

  1. If it is a straight forward purchase an escrow account should be avoided as the saving can be quite substantial.
  2. Traditionally in Berlin the commission for the property agent is paid by the buyer. For a long time 6% plus VAT was custom and practise. With the recent influx of international investors these margins have come under pressure, especially with the agents not assuming any responsibility for the information provided by them.

The cost of financing will depend on many factors like the amount of equity used etc.. There will be cost for Technical Due Diligence and valuation, "handling fee" between 0.25 and 1 % of the loan charged by the bank and entry of the loan into the deeds register. With the right approach and experience there is also a money saving way of doing this.

Naturally there are many more aspects to be considered before making a purchase: Review of the rental contracts, maintenance, ancillary cost to mention only a few of them. Language can be quite an obstacle because an investor can not expect every property manager or care taker to speak English.

Businesses like
Berlin Portfolio Ltd. and their network of Real Estate Professionals from Notaries to Tax Consultants and Finance Brokers are specialised in assisting international investors in their investment decisions, providing a "home base" for their activities in Berlin -- before and after the purchase.




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